Where can you find a depreciation expense?

Expert Solution

Depreciation expense is the appropriate portion of a company's fixed asset's cost that is being used up during the accounting period shown in the heading of the company's income statement.

The monetary value of an asset decreases over time due to use, wear and tear or obsolescence. This decrease is measured as depreciation.

Depreciation, i.e. a decrease in an asset's value, may be caused by a number of other factors as well such as unfavorable market conditions, etc. Machinery, equipment, currency are some examples of assets that are likely to depreciate over a specific period of time

When a long-term asset is purchased, it is often capitalized instead of being expensed in the given period. This is because that asset will generally still be economically useful and generate returns beyond that accounting period, so expensing it in that period will overstate the expense in that period and understate it in all future periods. To avoid this, depreciation expense is used to better match the expense of a long-term asset to the revenue it generates.

There are different methods used to calculate depreciation expense, and the type of depreciation accounting used is generally selected to match the nature of the equipment

jeff jeffy answered 1 year ago

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